ASTH Q1 Earnings Call: Growth Driven by Acquisitions, Margin Pressure Persists

Healthcare services company Astrana Health missed Wall Street’s revenue expectations in Q1 CY2025, but sales rose 53.4% year on year to $620.4 million. Next quarter’s revenue guidance of $635 million underwhelmed, coming in 2.7% below analysts’ estimates. 

Is now the time to buy ASTH? Find out in our full research report (it’s free).

StockStory’s Take

Astrana Health’s first quarter reflected the ongoing execution of its growth strategy, primarily fueled by the expansion of its Care Partners segment and significant progress in moving members into full-risk arrangements. CEO Brandon Sim emphasized the importance of the company’s delegated, physician-led model, noting, “Our care delivery infrastructure integrates high-performing provider networks with direct care delivery capabilities in our clinics and with our care management teams, enabling us to manage care more proactively and more consistently.” Management attributed the quarter’s performance to successful integration of acquired assets and continued investment in technology and operational scale, while also acknowledging that increased emergency room and lab utilization—driven by a challenging flu season—contributed to higher medical costs.

Looking ahead, Astrana Health’s guidance is built on expectations for continued member growth, further integration of recent acquisitions, and disciplined expansion into emerging markets. Management highlighted the pending Prospect Health acquisition as a major driver, stating, “The transaction will significantly expand our provider network in Southern California and will position us to serve approximately 1.7 million members in value-based arrangements.” The company also addressed regulatory and reimbursement uncertainties, with Sim noting that policy shifts like California’s Proposition 35 and the federal Medicare Advantage rate notice are expected to have a neutral or positive impact. Investments in technology, analytics, and leadership are expected to support scaling the platform and managing operational complexity as the company grows.

Key Insights from Management’s Remarks

Management attributed revenue growth to Care Partners segment expansion and strategic member risk transitions, while margin pressure reflected ongoing integration costs and increased ER and lab utilization during a severe flu season.

• Care Partners expansion: The Care Partners segment experienced 57% year-over-year growth, driven by both organic member additions and the integration of acquired networks, supporting Astrana Health’s long-term member growth objectives.
• Full-risk contract progress: Approximately 38% of members are now in full-risk contracts, up from 5.5% a year ago, with these members representing 75% of capitated revenue. This transition is positioning the company for greater alignment between financial outcomes and patient care quality.
• CHS integration milestones: The company completed the integration of the CHS acquisition, realizing over $10 million in general and administrative cost efficiencies and onboarding CHS to Astrana’s technology platform. Management expects CHS to reach breakeven profitability in 2025 and contribute positively in 2026 and beyond.
• Emerging market development: Astrana Health reported breakeven results in both its Nevada risk-bearing network and AstranaCare clinics, with membership and visit volume in Nevada rising significantly. Progress in Texas continues, with profitability expected in late 2025.
• Margin pressure sources: Operating margin contraction was attributed to investments in technology and integration, the inclusion of lower-margin new business (such as CHS and new full-risk cohorts), and elevated medical costs from seasonal factors like the flu.

Drivers of Future Performance

Astrana Health’s outlook centers on ramping acquisition integration, further member growth in full-risk models, and managing regulatory headwinds while maintaining disciplined investment in technology and operations.

• Acquisition integration and synergy capture: The pending Prospect Health acquisition is expected to expand Astrana’s provider network substantially, with management aiming to realize $12–$15 million in synergies and $81 million in incremental adjusted EBITDA once closed. Successful integration of large acquisitions remains a primary focus for operational execution and future profitability.
• Value-based care expansion: Management continues to prioritize transitioning more members into full-risk, value-based arrangements. This approach is designed to align incentives for patient outcomes and cost control, but profitability improvements from these cohorts are expected to materialize gradually as infrastructure and care management processes mature.
• Regulatory and reimbursement environment: Astrana Health anticipates stable or slightly favorable reimbursement trends following the recent Medicare Advantage rate notice. However, management highlighted ongoing uncertainty in Medicaid contracts, California’s Proposition 35, and potential changes in provider taxes, all of which could influence revenue visibility and margin performance throughout the year.

Catalysts in Upcoming Quarters

In the coming quarters, investors will monitor (1) the closure and integration of the Prospect Health acquisition and resulting synergy capture, (2) the pace of member transitions into full-risk contracts and associated margin improvement, and (3) Astrana Health’s ability to manage medical cost trends amid seasonal and regulatory variables. Execution on technology investments and leadership integration will also be critical signposts for sustained growth.

Astrana Health currently trades at a forward EV-to-EBITDA ratio of 6.2×. At this valuation, is it a buy or sell post earnings? See for yourself in our full research report (it’s free).

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